Nearshore Outsourcing of Digital Transformation: Pros and Cons

Technology is becoming an increasingly overwhelming force. Even leading tech companies cannot rely solely on their internal IT capabilities. They, too, reach out to third-party service providers and open-source communities to keep up with the continuously evolving technologies. That means virtually ...

By Konstantin Didur
• June 10, 2017

Technology is becoming an increasingly overwhelming force. Even leading tech companies cannot rely solely on their internal IT capabilities. They, too, reach out to third-party service providers and open-source communities to keep up with the continuously evolving technologies. That means virtually all businesses have technological gaps that they cannot fill in internally.

This is especially true for enterprises that hesitated with switching to a digital mindset. For them, outsourcing to nearshore and offshore vendors seems like the only effective way to succeed with digital transformation and ultimately stay competitive. The market largely agrees with that statement:

Digital technologies are a major global disruption that penetrates every industry. Enterprises cannot neglect the fact that markets are changing. Customer’s preferences shift towards digital interactions at all stages of the decision journey, as it happens in banking and insurance. Traditional non-digital ways of doing business won’t work in the near future. In other words, even large established enterprises have a simple choice: change or disappear.

Solution vendors and their customers come from all over the world. This fact once again proves digital transformation is a global trend that affects all industries in every region.

Vendor’s geographical location is not as important, as his expertise in a particular digital domain. Technological know-how is not confined to a particular region, and industry leaders are not afraid to collaborate with nearshore outsourcing providers. Businesses actively seek digital partners globally: in Europe, Asia, and North America.

Studies also suggest the scale of global digital outsourcing is only growing. By 2019, third-party technologies & services will account for nearly 75% of the IT spending.

These trends are remarkable. Never before have businesses relied so much on the offshore and nearshore outsourcing vendors. Why do they see great value in collaboration with solution providers?

Benefits of Outsourcing Digital Transformation

Industry disruptions are so great, companies cannot digest them internally. Comprehensive digital transformation calls for expertise in so many different domains that chasing each one of them is simply not cost-effective. That is why businesses benefit from partnerships with third-party solution providers. Here are some obvious advantages:

Sophisticated expertise. Outsourcing parts of transformation process where the company has little or zero expertise. This way, enterprises close the gaps in their digital capabilities and focus on other critical transformational objectives.

Digital insights. Companies gain insights about disruptive technologies and find ways to apply them for their business needs. Many ideas are born along the way, during cooperation with an offshore or nearshore outsourcing vendor. It is common for partnerships to start on a smaller scale and then to expand into additional digital solutions.

Faster time-to-market. Speed is one of the key features of any digital transformation process. Third-party providers already have expertise in particular domains. Therefore, usually develop digital solutions faster than customer’s internal team.

Strategic Partnerships. Solution providers that specialize in digital transformation usually have experience in multiple disciplines. It is highly possible that a single vendor can fill in most, if not all, of company’s technological gaps. For instance, a single provider can have expertise in scalable cloud solutions, enterprise mobility apps, big data tools, VR/AR applications, etc.

Challenges of Nearshore Outsourcing

Digital transformation is a complex process that calls for thorough planning, top managers’ commitment, and good execution. The Same statement applies to cooperation with digital vendors. Businesses actively source third-party service providers to implement their digital transformation initiatives, but often fail to develop a real partnership. Studies reveal interesting findings:

The majority of businesses that collaborated with third-party vendors are satisfied with their choice to outsource.

At the same time, companies do not structure consistent and ongoing collaboration with their solution providers. For various reasons, enterprises are reluctant to engage in a deeper cooperation, which creates unnecessary obstacles and slows down implementation process.

As a result, only 34% of businesses are completely satisfied with their digital vendors.

Several studies reveal that businesses consider their digital transformation programs successful in around 25% on the cases. This data stresses the importance of choosing a suitable solution provider. It also seems technological disruptions call for closer cooperation between customers and solution providers. This way client learns more about vendor’s capabilities. Additionally, the vendor becomes better aware of the customer’s needs and can offer unique tailored solutions.

The case of Lebara and N-iX is a good example of how close cooperation between an enterprise and its digital solutions’ provider pays off. In 2014, Lebara started working with N-iX on a smaller scale. The partnership scaled quickly and as of May 2017, dedicated development team at N-iX includes 100+ software engineers. The solutions N-iX delivers for Lebara range from payment engine and campaign management tools to live messenger app and content streaming engine.

When Lebara started digital transformation, they decided to stick with their existing prime digital vendor for several reasons:

Extensive cross-domain expertise in Big Data, Enterprise Mobility, Content Management, Blockchain, Cloud, and more. N-iX is able to fill in all technological gaps for Lebara.

Wide technological knowhow: from .NET & Java to Golang & Hybris.

N-iX has experience in microservices backend architecture: that is exactly what Lebara needs for the seamless omni-channel delivery.

Zero learning curve: N-iX is already aware of Lebara’s digital needs and can offer out-of-the-box solutions for back office and front office operations.

While digital disruptions pose obvious treats to the established companies, they bring great possibilities, too. Success stories of Telefonica and Lebara show how reaching outside the organization helps enterprises gain the required technological expertise and completely transform their business. Close cooperation with a suitable nearshore outsourcing vendor is often a key to succeeding with digital transformation.

About N-iX

N-iX is an Eastern European provider of software development
services with 900+ expert software engineers onboard that power innovative technology businesses. Since
2002 we have formed strategic partnerships with a variety of global industry leaders
including OpenText, Novell, Lebara, Currency Cloud and over 50 other medium and
large-scale businesses. With delivery centers in Ukraine and Poland, we deliver
excellence in software engineering and deep expertise in a range of verticals
including finance, healthcare, hospitality, telecom, energy and enterprise content
management helping our clients to innovate and implement technology
transformations.